Trust Loan Agreements (terms 5-10 years) what are our legal options? (no BG please)

[RoGeorge]

I'm genuinely interested as to what is supposed to happen at 10 years? forgive the question, seasoned contractor but never used these schemes.

The following I was told by the promoter in there sale brochure..can someone please comment how true this is??? I am sure many of us were promised this

"Many beneficiaries request the Trust to refinance the loan at this stage over a further 10 year term in which case the loan incrementally increases as time passes.
The loan cannot be “called in”, although potentially the trustees could refuse to roll the loan over. They could only do this legally if it was deemed to be in the “beneficiaries’ best interests” (perhaps due to a change in the law that makes it beneficial to have the loan dealt with in some other way); otherwise there would be a breach of fiduciary law.
There are instances where the loan and subsequent loans can be refinanced every 10 years such that they exist in perpetuity and after death will be considered settled, as under English law debt cannot be inherited. The value of the accrued loans can actually also be used to offset against any inheritance tax due by the beneficiaries’ estate.
It is important to understand that when a beneficiary is borrowing from a Trust it is not like borrowing from a bank because ultimately the beneficiary is the beneficial owner of the funds they are borrowing– it’s more akin to the left pocket of a beneficiary borrowing funds from their right pocket, however by borrowing the money on commercial terms they can compliantly avoid an income tax liability because the borrowed funds are not an income payment.
When an asset is held in a Trust, there is a separation in law of the legal ownership of the asset: the trustee is the legal owner but the beneficiary is the beneficial owner. This means that while the trustee holds legal title of the asset, they are legally bound to only use it in a way that benefits the beneficiary, and cannot use it for their own gain."

[Manic]

The following I was told by the promoter in there sale brochure..can someone please comment how true this is??? I am sure many of us were promised this

"Many beneficiaries request the Trust to refinance the loan at this stage over a further 10 year term in which case the loan incrementally increases as time passes.
The loan cannot be “called in”, although potentially the trustees could refuse to roll the loan over. They could only do this legally if it was deemed to be in the “beneficiaries’ best interests” (perhaps due to a change in the law that makes it beneficial to have the loan dealt with in some other way); otherwise there would be a breach of fiduciary law.
There are instances where the loan and subsequent loans can be refinanced every 10 years such that they exist in perpetuity and after death will be considered settled, as under English law debt cannot be inherited. The value of the accrued loans can actually also be used to offset against any inheritance tax due by the beneficiaries’ estate.
It is important to understand that when a beneficiary is borrowing from a Trust it is not like borrowing from a bank because ultimately the beneficiary is the beneficial owner of the funds they are borrowing– it’s more akin to the left pocket of a beneficiary borrowing funds from their right pocket, however by borrowing the money on commercial terms they can compliantly avoid an income tax liability because the borrowed funds are not an income payment.
When an asset is held in a Trust, there is a separation in law of the legal ownership of the asset: the trustee is the legal owner but the beneficiary is the beneficial owner. This means that while the trustee holds legal title of the asset, they are legally bound to only use it in a way that benefits the beneficiary, and cannot use it for their own gain."

I see, thanks.

[GUD]

Loan Charge 2019

Has anyone considered the settlement option with HMRC? The deadline to register is 31 May 2018 otherwise the loan outstanding as at 5 April 2019 shall be treated as 2019 income.

[me206et]

Has anyone considered the settlement option with HMRC? The deadline to register is 31 May 2018 otherwise the loan outstanding as at 5 April 2019 shall be treated as 2019 income.

Yes. It is a lot cheaper for me, i.e. 40% less.
Would love to fight it but it is financially suicide.
You can register and not settle, if you do not wish to.

[GUD]

Yes. It is a lot cheaper for me, i.e. 40% less.
Would love to fight it but it is financially suicide.
You can register and not settle, if you do not wish to.

If we go with settlement route, will it be around 35% of outstanding loan amount + National insurance contributions + inheritance tax + interest? I don't know how can settlement be then cheaper compared to loan tax charge. We all have already used the personal tax allowances for the past years in question. So, there is little benefit I can see in settling. Further, are we expecting any assessments to open for our companies also from which we paid the corporation tax?

[phil@pmtc]

If we go with settlement route, will it be around 35% of outstanding loan amount + National insurance contributions + inheritance tax + interest? I don't know how can settlement be then cheaper compared to loan tax charge. We all have already used the personal tax allowances for the past years in question. So, there is little benefit I can see in settling. Further, are we expecting any assessments to open for our companies also from which we paid the corporation tax?

id suggest checking the calculations for both settlement and loan charge options so you can check your personal position. Also, settlement is 100% final whereas the loan charge cant 100% guarantee that (though as i've said previously its pretty close to being so but 'pretty close' isn't 100%). Id estimate that for 95% plus of cases i've looked at - settlement was cheaper. Admittedly that doesn't mean a thing though as it still comes down to each persons specific circumstance

[Loan Ranger]

id suggest checking the calculations for both settlement and loan charge options so you can check your personal position. Also, settlement is 100% final whereas the loan charge cant 100% guarantee that (though as i've said previously its pretty close to being so but 'pretty close' isn't 100%). Id estimate that for 95% plus of cases i've looked at - settlement was cheaper. Admittedly that doesn't mean a thing though as it still comes down to each persons specific circumstance

WHS

Where settling works out worse is for very old open years, due to the high interest charges.

See last two pages of the PDF.
https://forums.contractoruk.com/hmrc...g-vs-lc19.html

[GUD]

id suggest checking the calculations for both settlement and loan charge options so you can check your personal position. Also, settlement is 100% final whereas the loan charge cant 100% guarantee that (though as i've said previously its pretty close to being so but 'pretty close' isn't 100%). Id estimate that for 95% plus of cases i've looked at - settlement was cheaper. Admittedly that doesn't mean a thing though as it still comes down to each persons specific circumstance

Thanks. I was contracting under SP Management loan scheme from Q3 2013 to Q2 2016 - so years in question are 2014 to 2017. The outstanding loan is roughly £225k. Should I consult a tax advisor or approach HMRC directly for settlement? HMRC has provided contractor helpline. So, I thinking of going directly instead of paying to PTC £750 +15% of tax saved (i.e. 2019 loan charge minus settlement reached with HMRC). Any advice please?

[GUD]

If we go with settlement route, will it be around 35% of outstanding loan amount + National insurance contributions + inheritance tax + interest? I don't know how can settlement be then cheaper compared to loan tax charge. We all have already used the personal tax allowances for the past years in question. So, there is little benefit I can see in settling. Further, are we expecting any assessments to open for our companies also from which we paid the corporation tax?

From where did you get an assessment done please? I would like to get an estimate of how much I would have to settle with HMRC

[kev1n]

Thanks. I was contracting under SP Management loan scheme from Q3 2013 to Q2 2016 - so years in question are 2014 to 2017. The outstanding loan is roughly £225k. Should I consult a tax advisor or approach HMRC directly for settlement? HMRC has provided contractor helpline. So, I thinking of going directly instead of paying to PTC £750 +15% of tax saved (i.e. 2019 loan charge minus settlement reached with HMRC). Any advice please?

I am in exactly the same boat for roughly that time period. PTS Ltd are also in IoM and I am not going to hand over any more cash to resolve this, as is Vanquish (Jack Murray who you all know and love, used to work for SP Management). I intend to go to HMRC directly.

I do have one question. If we settle on the tax for these loans over that period I am assuming the loan cannot be claimed back from KHT or SPM as the taxman has clearly seen this as income. Is this correct?